Inheritance tax revenue doubles as Labour hits the family

Revenue from inheritance taxes has more than doubled since Labour came to power.

The Treasury has already received more money in the first six months of this year than in the whole of Tony Blair's first year in office.

Official figures reveal the impact on thousands of families who are being 'double taxed' - having to pay during their life and again after they die.

Between January and June this year, a record £1.71billion was paid in inheritance tax, compared to £1.68billion in Labour's first year in power, from May 1997.

The tax could be worth a record £3.6billion this year, up from £3.3billion last year, because soaring house prices have dragged more people into the death duty tax trap, a situation which is only going to get worse, the Halifax warns.

By 2020, it fears that one in five homes in Britain will be worth more than the inheritance tax threshold, which is currently £285,000.

At present, 1.5million homes in this country are estimated to be above the threshold, meaning many hard-working families are being forced to pay a tax that once applied only to the rich.

Inheritance tax is charged at 40 per cent for all assets, typically a home and a person's savings and investments, above £285,000 after they die.

But the threshold has fallen far behind the value of most people's homes, with the average asking price in London now £315,000.

Mike Warburton, of accountants Grant Thornton, said: "Gordon Brown is prepared to sit back and let the money roll in at the expense of ordinary people.

"Should individuals, who may have been basic-rate taxpayers during their lifetimes, be expected to pay a higher rate of tax of 40 per cent when they die?"

Halifax claims that the inheritance tax threshold would be £430,000 if it had been increased with house price inflation. Over the last decade, a typical home has shot up in value by 179 per cent to an average of nearly £180,000.

But the threshold has gone up just 85 per cent, which is causing problems for people who want to leave money to their families when they die.

Tim Crawford, group economist at Halifax, said: "More homes are valued above the threshold and more estates are potentially liable for the tax.

"We call on the Government to raise the threshold to £430,000 to account for the increase in property prices over the past ten years."

The Tories made the last big rise in the threshold in 1996 when it rose nearly £50,000 to £200,000.

The number of people who pay inheritance tax every year is still small, currently about 37,000.

The Treasury insists that inheritance tax threshold is not unfairly low.

A spokesman said: "No previous administration has ever linked tax thresholds to price movements of any particular asset, such as housing. The practice of this Government is no different."